USD Falls Back, Stalls Copper Consistent Crash Ahead of the FOMC

Although Copper prices got their first weekly gain since May last week and may rise higher if the USD further softens, the metal is down nearly 10% this month. Copper prices dropped by over 20% from April to June, the largest quarterly drop in over ten years. Traders turned bearish on the metal as economic indicators across the United States, Europe, and Asia worsened during that time.

The pullback in the US Dollar strengthened copper, as a weaker USD makes it cheaper for foreign buyers to purchase the red metal, which is mostly traded in the USD. The FOMC meeting and the US advance second-quarter GDP print may influence copper prices.

China is the world’s biggest consumer of copper and its economy has been a source of worry for the copper market. Even though the year started well for China with high expectations for its economy, the plans were weighed down by the lockdown and the delicate real estate sector. However, Chinese policymakers have intensified their efforts and are looking to meet their targets in the coming months.

Copper miners’ production targets are also affected by prices. For instance, Freeport-McMoRan Inc., one of the largest public copper miners, posted a discouraging earnings report last week. The price drop weighed on the company’s fiscal position despite healthy demand and a tightly supplied market.

On a call with investors, CEO Richard Adkerson stated that the copper market remains tight. Mr. Adkerson also said that new mining ventures are unlikely, given the low prices. Assuming demand remains healthy, that would keep the physical market tight, perhaps leading to higher prices. A major Anglo-Australian mining company, Rio Tinto is set to report results later this week.